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Elizabeth Weintraub
New Twist for Sacramento Short Sales With a Second Mortgage
Before I get started, let me say that I know agents in Sacramento who will refuse to work on short sales with a second mortgage. Yeah, that’s ridiculous. Sure, it’ s a little bit more work with two loans, and second mortgages on a short sale can throw a monkey wrench into negotiations if they are hard-money loans, but that’s the job of a Sacramento short sale agent, to make it work.
I used to believe that only a lawyer could negotiate certain types of Sacramento short sales but after doing them for almost 8 years, I don’t believe that anymore. In fact, many lawyers hire an assistant or clerk to actually process the short sale. There seems to be little hands-on involvement. Because of the volume I do, and my personal interaction, I hear new developments often before they become mainstream. That’s a benefit to hiring an experienced Sacramento short sale agent to do your short sale and not some recently licensed agent who sat through an online class or a lawyer who pawns off the work.
The new development with the second mortgages secured to underwater homes is some of them are vanishing. Yes, poof, gone. The seller no longer owes the debt. This is done without the seller’s approval, too. The bank simply releases the loan and forgives the debt.
At first I thought maybe they were releasing the loan but not reconveying the mortgage, as what happens in a bankruptcy before a short sale. In a bankruptcy, the debt is discharged and the seller is released from personal liability. However, the loan remains secured to the property in a bankruptcy and the seller remains in title. Some sellers end up filing a Chapter 7 thinking this will get rid of the house, and it doesn’t. Not only that, but some sellers might be better off just doing a short sale and forgetting about a Chapter 7, especially if their only debt is the house.
This is a good place to acknowledge that I have never heard a bankruptcy lawyer say to a qualifying client: don’t do a bankruptcy. That’s like asking a Sacramento real estate agent if you should sell your house or asking a hairdresser if you should cut your hair.
Why would a bank release a second mortgage? Partly due to the National Mortgage Settlement Act and a few other lawsuit settlements. You might wonder why do they care about hanging on to a worthless piece of paper that has no security anyway? So investors can question their assets? Yet, I’m still a bit amazed that banks are issuing reconveyances and letting sellers go.
In some cases, it might mean that the seller won’t even have to resort to a short sale if prices continue to go up. That’s pretty good news for Sacramento sellers. It also makes negotiating the short sale quite a bit easier when there’s only one lender. But it’s still not impossible to work on short sales with a second mortgage, and I do it all the time.
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When One Thing is Not Like the Other Things
A Sacramento real estate agent needs to possess extraordinary powers of observation, just like a journalist. My late father-in-law, a former Chicago Sun Times journalist, would often boast to strangers (and his family) that he was a “proFESSional obSERVer,” which was generally used in a conversation to support dissent, to build a case for his opposing point of view. Half-jest but half-serious, too.
Sometimes, an agent can tap a simple component in the power of observation by isolating and analyzing the one odd thing that stands out from the others. This happens when one thing is not like the other things. Let’s take a situation when sellers receive multiple offers from buyers for, say, single-level homes in Elk Grove. Even better if a single-level Elk Grove home is located on a cul-de-sac, with hardwood floors throughout and a 3-car garage. Then, in the middle of dozens of offers arrives a lone cash offer for significantly more money. Sort of stands out like a sore thumb. Like when one thing is not like the other things.
That offer would be the one thing that is not like the other things. A seller might want to grab that offer and latch on to it like Gollum stroking his precious ring. This is the part in which a Sacramento real estate agent might caution the seller, and make sure the seller understands the possible consequences. When one thing is not like the other things, something might be wrong.
For example, I wandered through my vegetable garden a few days ago, on a hunt for ripened serrano peppers. Because it’s October, the garden is overgrown; oddly enough, we have tiny little tomatillos that are no bigger than an olive. For some reason, the tomatillos are fairing poorly this year; their entangled vines are crawling up the sides of another garden box, blocking the path. My focus was on the tomatillos, wondering whether my husband is right and we should yank them out.
As I passed the hydrangeas, something caught my eye. Among the decaying purple and pink flowers, I spotted a peculiar object. Whoa. It was not like the others. It was a cucumber. That stopped me in my tracks. A cucumber does not belong there. This is one thing that is not like the other things. The cucumber had crept over on a vine and worked its way up the hydrangea branch. Just the right size, too. I plucked it and ate it on the spot.
That is an example of when it’s a good thing that one thing is not like the other things. Sometimes, though, when one thing is not like the other things, it can be a bad thing.
Take the cash buyer who offered way above everybody else for that home in Elk Grove. The cash buyer caused the sellers unnecessary stress and commotion throughout the entire transaction. Demanded kickbacks, insisted the seller pay for an inspection that the buyer ordered himself and made up his own rules as he went along. The buyer reneged on verbal assurances and in general made himself a royal pain to the seller. At closing, he made his buyer’s agent wait four hours at the home, in an empty house, to deliver the keys.
Sell the Seller Benefits When Buying a Home
When most Sacramento home buyers envision buying a home, they tend to view their first home as a place to live in-lieu-of an investment. This means they want the home to be in tip-top condition without any defects. They strongly care about the sales price only if nobody else does. If there are no other offers, in today’s fall market, they might offer less than list price in hopes of negotiation. Yet, if the house truly meets their needs, home buyers will pay what it takes.
I think about how this compares to some of the homes I’ve bought in my life. I came into real estate as a buyer’s agent for investors, and I started at a small Newport Beach real estate company, which I later bought. My training was untraditional but valuable. Today, I strongly believe that every agent should at least work a few years for a major broker before trotting off on their own, if that’s what they desire, because there is so much to miss by not having the proper training and absorbing social etiquette about the business. It’s only in retrospect that I see this about myself. I was lucky in my ignorance.
When this Sacramento real estate agent decided to buy her third house, I found out everything I could about the seller. I had been watching this particular home in the Sunday open house ads (before the Internet). It had a white picket fence — a Dutch Colonial. It was so darned cute, oozing curb appeal. The listing agent was informative and told me things she probably should not have such as the sellers had bought another home across town and moved out months ago. She told me where they moved, which was a very expensive part of town. People just blab if you ask the right questions.
The house had many problems. It was overpriced; featured a lovely gaping hole in the living room ceiling; the hardwood maple floors were in terrible condition and the wallpaper was atrocious.
I made an offer that the listing agent said would not get accepted. It was less than list price. My earnest money was $500 and there was no down payment. This was 25 years ago, when loans were assumable, and I offered to assume the existing financing. My offer meant that the seller had to take money out of a savings account to pay the commission and closing costs, because there was no money generated in the offer to pay these things.
The listing agent expressed doubt that the seller would take my offer and actually said that in all her years in the business, nobody writes an offer like that. That’s because she was in traditional real estate and not investment real estate. In my mind, I figured I would fix up the house and increase its value; make it my own. I can tackle just about any home improvement project by myself. DIY is not difficult.
To help the agent submit the offer, I drew up a list of benefits for the seller, explaining why the seller should take the offer. I laid out how much the seller has already spent over the past 6 months or so trying to sell the house. Mortgage payments had to be made even if the seller wasn’t living there. I compared that sum of money to the smaller amount the seller would need to pay to close escrow. I pointed out that banks might be reluctant to loan money on a home with a hole the size of a small car in the ceiling. And I ended it by documenting the release of liability from the loan that the seller would obtain when I formally assumed the loan.
The seller signed the offer. The agent practically fainted. This was very different from the way homes are sold today. But sellers still sell because it’s a benefit to themselves to do so. That part has not changed.
I think home buyers pass up some great opportunities in the Sacramento market by insisting on buying a move-in ready home. They can’t personalize the home or express themselves when it’s already done for them. And they pay more for updated homes, making them completely dependent on future appreciation and principal reduction to build equity. But I just go with the flow and help everybody achieve what they want. That’s my job.
Where Are the Home Buyers in Sacramento?
If you’re wondering where the Sacramento real estate market is moving right now, then this blog is for you. Because I list and sell a lot of homes in Sacramento, I can easily spot trends — if I’m paying attention and not hanging out with Myrl at The Dive Bar late at night. The trend now is buyers are in no big rush to buy, and inventory is lingering on the market. It doesn’t mean that a home won’t sell, it will just take a little bit longer and there might not be multiple offers.
I see some sellers are dismayed when they hear they might not receive multiple offers, but geez Louise, how many buyers does one seller need? A seller needs one committed and dedicated buyer who loves that seller’s home. It’s all about loving that home. It always has been. You just need to find that special person among home buyers in Sacramento.
A seller contacted me yesterday for an update on selling a home in Natomas. I had sent him a comparative market analysis last spring when the market was a frantic hotbed of activity. At that time, the home he wanted to sell could have listed for $225,000 and probably received multiple offers, which would have driven up the price a little bit. Today, that same home should be listed a little bit more conservatively, closer to $219,000, and he will most likely receive just one offer, and that offer might be for a little bit less.
This doesn’t mean prices are falling; it just means the strategy to sell is a little bit different. I suspect prices will stay fairly stable and probably rise again next spring, depending on where interest rates move. The thing about interest rates is movement doesn’t remove buyers from the marketplace as the economist at NAR predicts. A rise in interest rates simply lowers the purchasing power of the buyer. A half-point increase in an interest rate knocks down a buyer’s sales price by about $25,000. A full-point increase? $50,000 less. Home buyers in Sacramento should grab these historically low rates while they can!
I am including a chart below from Trendgraphix which shows the last 15 months of average sold sales prices by month versus the prices of homes for sale. You can see the average for sale price is higher than where the demand for homes lies. This doesn’t mean that sellers are asking higher prices and buyers are paying less, so don’t get confused about that. It means that the average sales price is higher than the average price most buyers can pay. There are more sales in the lower end. But look at that increase. That’s a 142% jump in our average sold price since summer of 2012, and it’s continuing to go up.
My conclusion is buyers can demand a little more and sellers will give it to them. Even in a market of limited inventory. Our inventory has almost doubled but it sits at 1.8 months. That is still incredibly low, and not a buyer’s market, unless we have no buyers. Where are the home buyers in Sacramento? I’ll tell you one agent shared with me this morning that her buyer has a list of 100 homes that the buyer wants to see. Who looks at 100 homes?
Gordon Lightfoot and The Dive Bar
The mermaid at The Dive Bar
The guy I felt sorry for last night was the poor valet dude at Ella Dining Room and Bar who, unknown to Myrl and me, had been waiting for an hour and a half for us to hightail our tipsy selves back to get our car. It was a miscommunication thing. I knew that we could leave the car with the valet at Ella while we scurried over to the Gordon Lightfoot concert at The Crest Theatre, because people do it all the time. Valet dude even asked us when the show ended, but we didn’t necessarily ask him when the restaurant closes.
We didn’t know we had a curfew. I’m telling you so if you go downtown Sacramento to dine at Ella and leave your car with the valet while you scamper off to some show at The Crest or some other mischief, that you make it a point to find out when you need to be back. Of course, Myrl and I, we could have walked back to my house, because the time distance on foot between my home in Land Park and the Crest Theatre is about 45 minutes. But somebody from Rocklin would probably have to hail a cab, and good luck with that in downtown Sacramento.
Myrl Jeffcoat and Elizabeth Weintraub at Macy’s
I decided yesterday not to take any appointments with my real estate clients for the rest of the afternoon because my friend, Myrl Jeffcoat, had agreed to a Chanel makeup session with me at Macy’s, dinner at Ella and then off to see Gordon Lightfoot. Myrl also sells real estate in Sacramento but that’s not what we talk about when we get together. An agent in my Lyon office talked us into the Chanel event, because I don’t care how old a woman gets, if she had fun with makeup as a teenager, it doesn’t really go out of style just because you’re an old goat. And I suppose that’s what keeps Chanel in business.
Myrl Jeffcoat at Ella Dining Room
After we finished our makeup, isn’t Myrl beautiful? we were immediately famished. Two Drunken Arnold Palmers we ordered at Ella, not really certain what was in the cocktail, but it was refreshing, and gingery. Yum. We don’t even play golf. Started off with a plate of succulent sea scallops, which melted in our mouths. Myrl chose the artichoke soup with bacon cream. How can you go wrong with bacon cream? You can’t. We finished with chilled lobster and dashed off to the show.
Gordon Lightfoot is older than dirt but he obviously enjoys putting on a show, and we felt honored to have snagged seats in the front. Nobody’s vocal chords seem to survive the aging process, so people who expected Gordon Lightfoot to sound like his old records might have been disappointed, but I was happy just to see him vertical. Not that I’ve ever seen him horizontal, mind you.
Gordon Lightfoot at The Crest Theatre
During the show, we chatted with guys in our row. When I asked Myrl if she had ever gone to a high school reunion, one of the guys perked up and said, “Yeah, but when I went to my 40th, there was nothing but old people there.” He stole my line. I had a strong urge to say, “You know, buddy, you’re no spring chicken yourself,” but I kept my lips zipped only because he couldn’t hear me. Then, later, while we were walking across the train tracks to the The Dive Bar, we realized those guys zipped backstage the minute the show was over. We could have been partying with the band, but no, we missed that opportunity! Darn, darn, darn.
Although, it’s hard to picture Gordon Lightfoot partying away, but if he did have an after-show get-together with all of his bandmates and buddies, well, we blew our big chance. What the hey. I am past 60, and Myrl is a grandmother, 9 years older than me. We giggled on over to The Dive Bar for a gin and tonic and to shoot photos of the mermaid. If you haven’t been to The Dive Bar, you’ve really got to go downtown Sacramento if for nothing else but to see the mermaid. The end of this story is we didn’t get arrested, we got our car back, and we made it home safely. The 3 ingredients for a great evening in downtown Sacramento!
